CA. Sanjeev Singhal
[Definition of Input Services under Rule 2(l) of CENVAT Credit Rules , 2004 commentary on above definition with case laws Instances on Input Services]
RULE 2(l) : Input Services
“Input Service” means any service,-
(i) used by a provider of output service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal; but excludes,-
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or
(B) Services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods; or
(BA) Service of general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle which is not a capital goods, except when used by
(a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ;or
(b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or
(C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;
| S.N. | Party | Extract of Input definition w.e.f 1.7.2012 |
| 1 | Manufacturer of final product | Input service means any service used by used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products, up to the place of removal, Specific Inclusion :
a) services used in relation to modernization, renovation or repairs of a factory or an office relating to such factory or premisesb) Advertisement or sale promotionc) Market research d) storage up to the place of removal e) procurement of input f) accounting , auditing, financing, recruitment, and quality control, coaching and training, computer networking, , credit rating,, share registry, , security, business exhibition, legal services, inward transportation of input or capital goods and outward transportation up to the place of removal |
| 2 | Provider of output service | Input service means any service used by provider of output service for providing an output service;
a) services used in relation to modernization, renovation or repairs of a premises of provider of output service or an office relating to such premises. b) Advertisement or sale promotionc) Market research f) accounting , auditing, financing, recruitment, and quality control, coaching and training, computer networking, , credit rating,, share registry, security, business exhibition, legal services, inward transportation of input or capital goods. |
| 3 | Specific exclusions;
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for – (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or (B) Services provided by way of renting of a motor vehicle, in so far as they relate to a motor vehicle which is not a capital goods; or (BA) Service of general insurance business, servicing, repair and maintenance , in so far as they relate to a motor vehicle which is not a capital goods, except when used by – (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ;or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or (C) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee; |
Meaning of “Includes”
The inclusive part of the definition cover input services used ‘ in relation to’ various activities. Definition are ‘inclusive’ or ‘exhaustive’. If the definition use the world ‘means’ it means that its restrictive and exhaustive. However if the word ‘includes’ is used in the definition it means that it is not exhaustive but inclusive. CCE v. Bakelite Hylam
Meaning ‘in relation to’
The word in relation to is very broad expression and are word of comprehensiveness which might have both a direct or indirect significance depending on the context. They are not the word of restrictive content. State of karnataka v. Azad Coach Builders.
Place of removal
CENVAT credit is available for input service up to place of removal. The concept of removal is borrowed from central excise and hence applies to only manufacturer and not service provider.
The term ‘ place of removal’ has not been defined in CENVAT Credit Rules but is defined in Section 4 (3)(c ) of central excise act as follows :
‘Place of removal’ means
i) A factory or any other place or premises of production or manufacture of the excisable goods.
ii) A warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty.
iii) a depot or premises of consignment agent or any other pace or premises from where the excisable goods are to be sold after their clearance from the factory,
from where such goods are removed.
The word ‘from where such goods are removed” apply to all the three clauses.
DSCL Sugar v. CCE, MP biscuit v. CCE
The place where ownership gets transferred to buyer is place of removal when there is direct sale from factory
Normally factory gate is place of removal. But in case of Ambuja Cements v. UOI [ Punjab and Haryana High Court][2009] it was decided that if the freight charges form part of the assessable value, price is for destination,
Port is place of removal in case of export
Kuntal Granites v. CCE [2007] , CCE v. Adani Pharmachem[2009]
Rajasthan spinning and weaving mills v. CCE [ 2007]
Expenses up to the place of removal are eligible for Cenvat. Centuary Ryon v. CCE [2012]
Services specially excluded from definition of ‘Input Services’
Some services have been specifically excluded from the definition of ‘input services’
♦ Construction related services specifically excluded under clause (A)
(A) service portion in the execution of a works contract and construction services including service listed under clause (b) of section 66E of the Finance Act (hereinafter referred as specified services) in so far as they are used for –
(a) construction or execution of works contract of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, Are excluded from the definition of ‘input services’
However these services are eligible as input services if used for the provision of one or more the specified services ( i.e construction/work contract of building or structure or laying of foundation etc as above)
♦ Services relating to setting up are not eligible ;
Broadly , services relating to setting up of unit are not allowed.
♦ Structural components which are essential part of equipment / machinery are eligible for Cenvat credit.
♦ Renting of motor vehicle specifically excluded under clause (B)
The term motor vehicle has not been defined in the Cenvat Credit Rules , 2004 . As per Central Excise motor vehicles are covered under chapter 87 of the Central Excise Tariff . Some vehicle (e.g. forklift truck , excavators ) require registration under motor vehicle act , but they fall under chapter 84 of Central Excise Tariff. Goods falling under chapter 84 are eligible for Cenvat credit as capital goods . Hence , insurance, repair services , renting etc. in respect of such vehicle should be eligible for Cenvat credit.
♦ Motor vehicle insurance and repair and maintenance services specifically excluded under clause (BA)
The clause as amended w.e.f 1.7.2012 is as follows;
Service of general insurance business, repair and maintenance , in so far as they relate to motor vehicle which is not capital goods will not be eligible for Cenvat credit except when used by (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by such person ;or (b) an insurance company in respect of a motor vehicle insured or reinsured by such person; or
♦ Services for personal use or consumption of employees specifically excluded under clause (C).
Services such as outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession have been specifically excluded from the definition of input services.
However, this exclusion is only when such services are used primarily for personal use or consumption of any employee. Like mobile phone to employee for business purpose is allowed. Club membership fees of director who is not employee should be eligible. Corporate club membership [ without any name of employee] shall be eligible .
Meaning of ‘such as’ the exclusion clause uses the word ‘such as’ . The world such as are used only to illustrate the scope. It is not restrictive. Such as means for ‘example’
CCE v. JK Cement Works [2009], TTK Pharma Ltd v. CCE [ 1993]
Eligibility of Various Services as Input Services
| Accounting Services | Eligible as specifically included in definition |
| Advertisement [ may be recruitment , tender, sales promotion , legal notice etc.] | Eligible as specifically included in definition |
| Air travel of employee | Eligible if in relation to inclusive services mention in 2( l ) |
| Airport services | Eligible if in relation to inclusive services mention in 2( l ). The services is also eligible in case of construction or work contracts services or port or airport services. |
| Architect Services | Not eligible if provided for services specifically excluded under clause A of 2(l).If the service is used for other purpose shall i.e. finishing services , repair, alteration, or restoration , these should be eligible. The services is also eligible to person providing construction or work contract service itself. |
| Auditing Services | Eligible as specifically included in definition |
| Authorised Service Station | Usually not eligible except the clause BA of 2(l) |
| Banking | Eligible under financing |
| Beauty treatment | Not eligible |
| Brand Ambassadors | Eligible as relating to Sales Promotion |
| Business exhibition | Eligible as specifically included in definition |
| Business Support Services | Eligible if related to inclusive part of definition |
| Canteen Expenses | Eligible as provided in recent circulars/ notification. |
| Clearing and forwarding agent | Eligible for input and for final product up to the place of removal. |
| Club membership | Not eligible |
| Commercial coaching and training | Eligible as specifically included in definition |
| Commission agent | Eligible as relating to sales promotion or procurement |
| Computer networking | Eligible as specifically included in definition |
| Consignment agent exp | Eligible as consignment agent place is place of removal when sale is from depot |
| Construction of building or civil structure or part thereof | Not eligible if provided for services specifically excluded under clause A of 2(l).If the service is used for other purpose shall i.e. finishing services , repair, alteration, or restoration , these should be eligible. The services is also eligible to person providing construction or work contract service itself. |
| Construction of residential project | Not eligible if provided for services specifically excluded under clause A of 2(l).If the service is used for other purpose shall i.e. finishing services , repair, alteration, or restoration , these should be eligible. The services is also eligible to person providing construction or work contract service itself. |
| Consulting engineers management | Eligible if for definition of rule 2(l) |
| Courier | Eligible |
| Credit rating | Eligible as specifically included in definition |
| Custom house agent | Eligible for procurement of input and also for export as port is place of removal |
| Depot expenses | Eligible as depot is place of removal |
| Director Services | Eligible as director control overall operation |
| Erection commissioning and installation | Not eligible as setting up of plant but eligible as modernisation, renovation of factory |
| Financing ( bank charges, lease, hire purchase) | Eligible as specifically included in definition |
| Foundation or support of capital goods | Specifically excluded |
| Gardening | Eligible if done as statutory requirement |
| Insurance of plant and machinery, building and transportation of input, capital goods and final product up to the place of removal | Eligible |
| Insurance of Motor vehicle | Ineligible except a] where vehicle is eligible as capital assets b] manufacturer of motor vehicle c] general insurance company |
| Health insurance | Ineligible |
| Information technology software | eligible if in relation to manufacture of taxable goods/ services and all services under the inclusive list. |
| Intellectual property service | eligible if in relation to manufacture of taxable goods/ services, quality control, sales promotion , computer networking |
| Job work | eligible if in relation to manufacture of taxable goods/ services and all services under the inclusive list. |
| Legal consultancy | Eligible as specifically included in definition |
| Maintenance and repair | eligible if in relation to manufacture of taxable goods/ services, modernisation and repair of factory or office, storage, quality control except where motor vehicle is not capital goods |
| Mandap keeper | Eligible if in relation to recruitment, accounts, audit, sales promotion ,procurement of input, legal services, financing and computer networking |
| Manpower recruitment and supply | eligible if in relation to manufacture of taxable goods/ services and all services under the inclusive list. |
| Market research | Eligible as specifically included in definition |
| Mobile phone [ even if in the name of employee but reimbursed by employer] | Eligible |
| Outward transportation | Eligible up to the place of removal |
| Real agent services | Ineligible |
| Renting of immovable property | eligible if in relation to manufacture of taxable goods/ services and all services under the inclusive list. |
| Setting of plant and office building | Ineligible |
| Showroom expenses | Eligible as sale promotion |
| Software | Eligible if in relation to manufacture of taxable goods/ services and all services under the inclusive list. |
| Supply of tangible goods for use service | eligible if in relation to manufacture of taxable goods/ services and all services under the inclusive list except for motor vehicle . |
| Transportation charges for employees | Ineligible |
| Travel by air , road, or water except by motor vehicle | Eligible |
| Work contract service | Not eligible if provided for services specifically excluded under clause A of 2(l).If the service is used for other purpose shall i.e. finishing services , repair, alteration, or restoration , these should be eligible. The services is also eligible to person providing construction or work contract service itself. |
Read Other Article written By CA. Sanjeev Singhal, FCA, DISA [ ICAI]
Author Bio
We are authorised service dealer of Maruti suzuki india Ltd. We received outside agency services for tinkering & painting works. Are we eligible to avail cenvat credit of tax paid or RCM paid on their bills ? subsequently we raise invoices to customers with service tax and remit the same to the Department. Please answer considering exclusion clause (BA ) of input service definition. The cenvat credit availed is not for personal use or consumption of employees. Any court decision?
Hi sir
we are a Customs House Agent when we providing service SEZ units we have to execute LUT with BG ?
Sir,
Telecom Factory (consignor) is production of some items for the Telecom Services in the other states. We are transporting the finished goods to other states our BSNL office. We are paying transporting bill in Consignor office. But Service tax paying by the Consignee and cenvat credit availing by the consignee. whether it is correct as per the cenvat credit rules. Please clarify whether service Tax on transport of goods by road is paying by consignor or consignee and who will avail cenvat credit if consignor paid Service Tax on Transportation of Goods to the consignee .
Hi, Thanks for your help in advance. Appreciate it wholeheartedly. We are a stock market advisory firm, providing stock market recommendation to our clients. Thus claiming output service tax from the clients for advisory service. At the same time, we also execute proprietary stock market trade in the firm’s trading account, thus paying input service taxes to the broker. Can this input service tax be adjusted against the output service taxes as explained above to take advantage of input tax credit?
We are mobile service company, We directly take mobile from Manufacturer for servicing for defaulted handsets, Can we take full ST input in office rent, telephone, security agency bill, housekeeping charges, transporter service bill etc
Please advise
Hello sir , i had a query, suppose i have availed legal & Professional services but party has not charges service tax on that. still can i avail input service tax credit.
Service Tax Input Credit:
We are a Real Estate Consultants & would like to know whether we could avail Input Credit for Service Tax paid on Travel Tickets, Lodging, Hotel, Mobile Bills, Subscriptions, Legal Fee, Recruitment Charges, etc.. which are incurred for official/business expenditures.
Thanks,
we(Pvt. Ltd. co.) are only provide acomodation service to guest, so can we avail cenvat credit and as per new notification what is service tax rate charged? earlier we charged 1.5%(90% abatement, ) so plz guide latest updated service tax rate.
we can take Service tax credit on transportation charge from Corporate office to Branch Office?
hi sir,
we are in hotel industry. can we avail svt input on cable subscription 957913/- INR.
We are into recruitment (man power supply) but registered as Management consultancy services. What are input tax credits applicable
we want to build a warehouse and want to give on rent. whether we are eligible to take service tax received during construction of warehouse. against my liability of service tax on rent.
sir, we are a steel manufacturer, can we take credit of service tax paid on insurance of 4 wheeler?
Please reply
i need to know whether input credit available from construction of another premises whose production (service tax leviable) is yet to start can be availed for set off or not. Although nature of business shall remain same.
Dear Sir,
Can we claiming cenvat credit of 3.62% which we paid with each installment to builder (Private) against our booking.
Please suggest……
one year
WHAT IS THE TIME LIMIT FOR CLAIMING CENVAT CREDIT ON INPUT SERVICES ?
can service tax credit carried forward under operating lease? plz reply soon
can service tax credit carried forward?
Sir, we are pvt co paying service tax on abated value as service receiver under GTA, are we eligible to claim cenvat credit of the same after paying the service tax on 30% of value of freight.
As transportation is eligible input service to claim cenvat credit but I have doubt as I am paying tax on abated value, is I am eligible to claim cenvat credit for the same.
How to claim credit if assessee is a seller of goods as well as provider of taxable services . Can he get 100% input credit on services like phone bills, audit fees etc.
Yes, as specifically included
Yes, as specifically included.
Respected Sanjeev Singhal Sir,
What is difference between On Input and on input service received Directly in Return ?
Thanks & Regards,
Sonu Aggarwal
We want to know availability of cenvat of service tax paid on erection and commissioning of new project
sir,
whether cenvat credit of service tax paid on courier, telephone bill, private security agency can be taken
we are in business of furniture manufacture..i would like to know whether service tax paid for air ticket eligible for cenvat credit
Whether Service tax charge by Industrial Development corporation towards lease payment on plot alloted. can we take cenvat credit of the same?
on courier services input tax credit can be taken while coming to telephone bills i bills are in the name of company then only input tax credit can be taken if they are in the name of employees they comes under employees reimbursement i.e employees benifits where ineligibility incurrs
on goods hire services input tax credit can be taken when hire is for employees only can’t be taken
Dear sir,
Whether service tax of courier bill, telephone bill, service tax paid to private security agency, police security can be taken as CENVAT credit?
Can be deducted from the service tax payable?
if so, please inform in which rule of CENVAT and section?
thanks and regards
Dear Sir,
We are a soft drink manufacturing company and wanted to know if we can enjoy CENVAT credit for the service tax portion of advertisement expenses of the final product incurred on television etc.
Kindly let us know if any case laws are present for the same.
Thanks
We (Pvt. Ltd. company) are in the business of Residential Building Construction. I would like to know whether service tax charge of courier company, telephone bill, can be taken as cenvat credit. Thanks –
Dear Sir,
In currently our company EA-2000 aduit for period Dec-14 To Jaan-15. Auditoer objection for Gardening Service is disallow because of our company premises two type of gardening activities one of our plant area and second is our colony area.In colony area not taken in cenvat credit but plant area i have taken cenvat credit.
Please suggest me in plant area gardening service service tax credit taken or not ?
Regards
Shailendar Barad
M.No.8347771707
Whether Club membership of Companies eligible for input service tax credit?
Pls confirm “setting up” definition wef 01.04.2011 removed under input credit of services – h/ever scn made on this setting up while we have availed input credit for all input services viz. GTA/Security/computer net working/SAP implementation etc./maint&repair/erection etc. before commencement of commercial production & clearance – not availed input credit civil construction, architect’s consultancy services,motor vehicle etc.while setting up of our factory constructed – is there any case law available or any other new industry faced any cases on this issues and what is the present status esp at Gujarat
for our clearfication that whether input on service tax are claim transport charges on good hire service
Micro soft software eligible to avail the service Tax credit or not
Dear sir,
Micro soft software eligible to availe the service tax input credit
Dear Sir,
I need your advice that can a company avail service tax input credit on bank charges paid for export remittance?
Sir, As per my understanding, works contract is per se excluded from the purview of input service. am I correct?
We (Pvt. Ltd. company) are in the business of Residential Building Construction. I would like to know whether service tax charge of credit rating agency can be taken as cenvat credit.
Thanks